How Gold & Will Silver Trade During The Next Market Crash

While many investors believe the gold and silver price will crash during the next market meltdown, I see a much different outcome. Yes, it is true that the metals may sell off initially in the beginning, but I believe gold and silver will disconnect from the broader markets and move up much higher.

The reason I see the precious metals disconnecting from the broader markets during the next major correction is due to the much different setup today in the gold and silver market than it was in 2008. Precious metals investors forget just how overvalued the gold and silver prices were based on technical analysis. Of course, I am not talking about the true “Store of value” properties of the precious metals, but rather, how they trade in reference to the market in general.

As I have stated many times, the paper trading market determines the price of gold and silver, not the physical buyer. Thus, the paper market will continue to control the gold and silver prices until investors realize the dollar is just another worthless fiat currency.

In the video, I discuss how the broader markets are setting up for a significant correction lower while the precious metals are behaving more like a coiled spring. Although, in the initial stages of market meltdown, we could see a broad-based selloff across all markets. However, the technical analysis suggests that the gold and silver prices are much closer to a bottom than a top.

Furthermore, another indicator, the Gold Hedgers Chart also provides more evidence that gold is become oversold, rather than overbought:

The gold short hedge position is now back to almost the same level as it was at the beginning of 2016 when gold was trading below $1,100 an ounce. This chart shows that when the gold hedgers position moves back towards the zero line, then the gold price is forming a bottom.

Lastly, when the Dow Jones Index fell 2,000 points at the beginning of 2016, investors flocked into gold and silver. As gold shot up in the first quarter of 2016, flows in the Gold ETF’s were the second highest in history. The quarter with the most Gold ETF inflows was Q1 2009 when the market was crashing to its lows. So, what do you think will happen when the Dow Jones falls precipitously this time around??

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27 Commentson "How Gold & Will Silver Trade During The Next Market Crash"

Hi Steve,
Your logic is undeniable, however, the markets especially silver and gold don’t follow basic economic sense. The are manipulated…and trying to predict a manipulated market is a fools game. Silver was $50 an ounce in 1980…that was 38 years ago and now it is $15.00 and some change. We have had a higher demand than supply for at about 20 years in a row and still…we are at $15.00 an ounce. The government stockpiles that were in the billions of ounces have long been depleted and we are…at $15.00 an ounce. None of this makes sense. None of this is logical. But this is the reality we have and it will only go away with a complete economic collapse. Until that moment, the powers that be will keep gold and silver suppressed so that they don’t compete with the fiat currency of the times.

While you are correct that the markets don’t follow economic sense (currently), if you watched the video, you would have seen that ECONOMIC CYCLES have been going on for 100+ years. Thus, economic cycles have been going on even with market manipulation.

We see recessions take place about every 7-8 years. This one is now on YEAR 9.

Now, there was a FUNDAMENTAL REASON why Gold & Silver shot up during the 1970’s period. We can thank that for massive inflation, especially due to the Oil Price. Let me provide you some price ratios:

There was no coincidence that the price of gold and silver reacted to the increase in the price of oil. I mentioned in a few articles that Homestake Mining, U.S. largest gold miner at the time, cost of production skyrocketed during the 1970’s. So, with higher costs, come a higher gold and silver price.

We saw the same thing take place with Oil, Gold, and Silver from 2004-2012.

However, this next market correction will behave much differently than in the past. Why? We won’t have the energy to pull us out of the next RECESSION-DEPRESSION.

The only marketing rigging of the gold and silver price is CAPPING IT. Traders know all too well that if the gold and silver price went too far below their cost of production, they would be buying HAND-OVER-FIST.

Lastly, the Central Banks cannot PAPER over the next Market Crash because they will not have the ENERGY to back them up.

“Thus, economic cycles have been going on even with market manipulation.”

Yes but TPTB got their asses kicked in 2011 when they lost control of the G & S prices, and they have worked hard since then to assure that won’t happen again. The software they developed/implemented allows MUCH more control of the COMEX & LBMA, and the stock markets, and every other market. Of course the governments plus central banks have participated.
When this was stated above, “But this is the reality we have and it will only go away with a complete economic collapse”, it may be close to the truth. G & S going up may happen right before, or ushering in, a serious recession or depression.

Silver price is not so low : it still nearly the 4 times from 2001 and nearly 5 times for gold.
For now the demand is way too low : only made from a few central banks and some indian peasants to simplify. We need real money coming from financial sphere.
By the way a positive note a very short term, David Morgan, one of the greatest clowns in the precious metals sector, is bearish short or very short term which could mean a bounce is not so far away now.

The monetary base is approximately 5x what it was in 2008. That makes silver cheaper in FRN’s. It’s a good deal in wages (if you can live without the money to spend) with only platinum and M855 ammo as similarly good deals.

I find it MUCH easier to make a hundred bucks now than in 2001. The problem is that it does not go as far. Products seem to go down in quantity if not also quality during the time. The roads have more potholes but taxes are up. Water/sewer is way up and up 10% just this quarter. The house is valued at 12x what I paid, but the problem is that the taxes are 4x as much while my hourly wages are only slightly increased.

You mentioned awhile back that you were going to do a review of the primary silver miners or rather the cost of production of silver. I note the First Majestic’s Q2 Report states “AISC in the second quarter was $16.43, representing a 3% increase”. I bet you have thoughts on that and the current trend among miners to “High Grade” to weather the low prices (Resource depletion = shortening mine life). Keep up the good work

Yes, I will still do a video-article on the primary silver miners. I would imagine the lower silver price and higher energy cost is impacting the silver miners. However, those silver miners, like Pan American Silver, who have a much higher Gold & Base Metal revenues, are doing much better than First Majestic who is one of the highest pure silver miners in the industry.

While First Majestic posted a large loss Q2 2018, Pan American Silver posted a large profit and the stock shut up like 10% that day. I need to put out information on the primary silver miners and which have a lower cost of production, or are making better profits due to their higher gold and base metal revenue.

Take note that during the initial 2008-09 market meltdown when the gold and silver price fell, a good portion of the drop in price was caused by big market forces, who were forced to sell their PM holdings to satisfy their margin calls.
This time around will be no different, when considering the massive amount of debt that has been built up on the margin in the markets. These risky market players will be forced once again to liquefy their precious metals holdings and pay their margin calls.
This will momentarily drive the price down, before it rebounds with a moon shot. This temporary draw back in price will be a last opportunity to buy at a reduced price. If you can find someone who is willing to sell!

Steve,
good stuff, thanks.
Was wondering about same thing.
Is there way to get an estimate of PM holdings in margin accounts? With gold out of favor – would it be less or higher than in 2008?
I guess we can’t predict flow of money in to PM but if USD will be perceived at risk – if will be overwhelming. May be prudent to add some now as last drop may be not happen or last long enough to back the truck.

It would be interesting to know someone in Venezuela who does have a little precious metal and how it does or doesn’t benefit him. Even if he could find and purchase some necessities(on the condition PM has a known value among people), he would probably have to do so secretly for fear of being robbed of his groceries and searched at home for more stashed PM.

I don’t know if conditions in the US would deteriorate to this level, but even now, I wouldn’t be broadcasting locally about owning any PM.

Walmart will open 10% higher today on stellar results and guidance. No reason for a crash in the core of capitalism ie US. I t may come but later, there is so no reason to buy gold, absolutely none. Of course emerging markets and periphery issues are no big deal for the system as a whole as they are triple zeroes regarding capitalism laws (turkey, russia, indonesia, argentina, venezuela)…